OWENS-CORNING FIBERGLAS CORPORATION, Petitioner, v. Roy MALONE et al., Respondents. OWENS-CORNING FIBERGLAS CORPORATION, Petitioner, v. Barbara WASIAK, et al., Respondents.
Nos. 96-0287, 96-0512.
Supreme Court of Texas.
Argued Nov. 21, 1996. Decided June 5, 1998.
Rehearing Overruled Aug. 25, 1998.
972 S.W.2d 35
Kevin F. Risley, N. Terry Adams, Jr., Houston, Larry L. Simms, Mark A. Perry, Washington, DC, for Petitioners in No. 96-0512.
David M. Gunn, Lawrence Madeksho, Robert E. Ballard, Houston, for Respondents in No. 96-0287.
Brent M. Rosenthal, Russell W. Budd, Janice Pennington, Dallas, for Respondents in No. 96-0512.
BAKER, Justice, delivered the opinion of the Court in which GONZALEZ, SPECTOR, ABBOTT and HANKINSON, Justices, join, and in which PHILLPS, Chief Justice, and ENOCH, Justice, join in all but part II.B.1.
We granted applications for writ of error in these product liability cases to consider two issues. First, in Owens-Corning Fiberglas Corporation v. Malone, we consider what evidence, beyond a defendant‘s net worth, is relevant and admissible when a defendant offers the evidence to mitigate punitive damages. Second, in Owens-Corning Fiberglas Corporation v. Wasiak, we consider whether the trial court‘s punitive damage awards, either in this case alone or when aggregated with previous punitive damages awards for the same course of conduct, violate the Fourteenth Amendment‘s Due Process Clause.
We hold in Malone that evidence about the profitability of a defendant‘s misconduct and previously paid punitive damage awards or previously paid settlement amounts for punitive damages for the same course of conduct is relevant and may be admitted when a defendant offers it to mitigate punitive damages. We nevertheless conclude that the trial court‘s error, if any, in excluding this evidence was harmless. We conclude in Wasiak that neither the punitive damage awards, in this case alone or when aggregated with other punitive damages OCF has previously paid for the same wrongful conduct, violate the Fourteenth Amendment‘s Due Process Clause. For the reasons set forth below, we affirm the courts of appeals’ judgments.
I. BACKGROUND
Malone involves three consolidated suits for injuries allegedly caused by asbestos-containing products that OCF produced or marketed. The parties tried Malone under Texas substantive law. Based on the jury‘s verdict, the trial court rendered judgment for the plaintiffs for $3.03 million total actual damages and $1.5 million total punitive damages. The court of appeals affirmed the trial court‘s judgment. 916 S.W.2d 551.
Wasiak involves four consolidated asbestos cases against OCF. In two cases, the decedents died of mesothelioma, a cancer related to asbestos exposure. In the other two cases, the plaintiffs were diagnosed with asbestosis, a scarring of the lungs caused by exposure to asbestos. The parties tried Wasiak under Alabama substantive law. After reducing the jury‘s verdict to reflect settlement credits from settling defendants, the trial court rendered judgment for the plaintiffs for about $1.6 million total actual damages and about $3.7 million total punitive damages. The court of appeals affirmed the trial court‘s judgment. 917 S.W.2d 883.
II. OCF v. Malone
A. OCF‘S EVIDENCE IN MITIGATION OF PUNITIVE DAMAGES
In an attempt to introduce mitigating evidence for the jury‘s consideration, OCF offered evidence from Peter Frank, a certified public accountant, about how much profit it earned from sales of Kaylo (an asbestos-containing insulation product), the adverse economic impact asbestos litigation has had on OCF, its past and future insurance coverage, OCF‘s out-of-pocket litigation costs, and the total amount of punitive damages awarded against OCF in asbestos litigation. After the trial court decided, over the plaintiffs’
Frank‘s prior testimony reflects that: OCF had received about 186,000 Kaylo-related asbestos claims; that about 62,000 of those claims were unresolved; that in 1992 alone, OCF received 27,000 claims, the highest annual number yet; that claims were resolved for about $10,000 on average; that OCF‘s net profit2 from Kaylo sales totaled about $1.5 million; that OCF‘s total costs to date due to Kaylo litigation exceeded $1 billion; that these costs have been covered, predominantly, by insurance; that $540 million to $675 million in available insurance remained for unresolved pending and future claims; that OCF‘s out-of-pocket costs to date for indemnity payments to plaintiffs and litigation expenses was about $20 million; that OCF‘s financial statements disclosed a $950 million accounting reserve to pay future uninsured Kaylo-related claims; that OCF predicted it would be able to fund this reserve with future earnings; that future unreserved and uninsured costs arising out of asbestos claims would not have a material adverse effect on OCF‘s financial position; that OCF was solvent, but had a negative net worth; that the original cause of OCF‘s negative net worth was fending off a hostile takeover bid by the Wicks Corporation; and that, if OCF‘s earnings trend continued, OCF could work out its negative net worth posture over the next fifteen years.
The Frank transcript does not include testimony about prior punitive damage awards against OCF. Instead, OCF offered an affidavit with attached exhibits from Robert McOmber, a former OCF lawyer, that included this information. OCF offered the McOmber affidavit with attached exhibits (cumulatively “the McOmber affidavit“) along with the Frank transcript as its complete offer of proof. In its briefing, OCF asserts that if the trial court had allowed Frank to testify about matters beyond net worth, Frank‘s testimony, including the McOmber affidavit, would have established that twenty-eight prior Kaylo-related punitive damage judgments totaling $51,710,200 had been awarded against OCF. However, the “enough is enough” evidence shows, and OCF‘s counsel conceded in oral argument before this Court, that OCF has only paid about $3 million in punitive damages for Kaylo-related claims.
OCF argues that the excluded evidence is relevant to the punitive damages determination consistent with the purposes of punishment and deterrence. OCF also argues that the excluded evidence is relevant to the factors that the trial court instructed the jury to consider in determining punitive damages: (1) the nature of the wrong; (2) the character of the conduct involved; (3) the culpability of the wrongdoer; (4) the situation and sensibilities of the parties; and (5) the extent to which the defendant‘s conduct offends the public‘s sense of justice and propriety. See Alamo Nat‘l Bank v. Kraus, 616 S.W.2d 908, 910 (Tex.1981) (the Kraus factors); see also
B. APPLICABLE LAW AND STANDARD OF REVIEW
1. Admissibility of Evidence in Mitigation of Punitive Damages
Punitive damages are not designed or intended to compensate or enrich individual
We have approved the Kraus factors as instructions for juries about punitive damages. See George Grubbs Enters., Inc. v. Bien, 900 S.W.2d 337, 338 (Tex.1995). Moreover, although we have never considered what type of evidence is admissible to mitigate punitive damages, we have recognized that a “defendant‘s ‘ability to pay’ bears directly on the question of adequate punishment and deterrence.” See Lunsford, 746 S.W.2d at 472; see also Wal-Mart Stores, Inc. v. Alexander, 868 S.W.2d 322, 329 (Tex.1993) (Gonzalez, J., concurring) (contending that jury should hear net worth evidence “plus any other evidence” relevant to the amount of punitive damages).
Other courts have held that factors about a party‘s financial situation beyond net worth are relevant to the punitive damages amount necessary to satisfy the purposes of punitive damages. See, e.g., Viking Ins. Co. v. Jester, 310 Ark. 317, 836 S.W.2d 371, 379 (1992) (holding that jury may consider defendant‘s “financial condition” when assessing punitive damages); Stevens v. Owens-Corning Fiberglas Corp., 49 Cal.App.4th 1645, 57 Cal.Rptr.2d 525, 536-37 (1996) (holding that defendant may inform the jury about other punitive damages awards for the same conduct, but the impact of those awards can only be measured if the awards have actually been paid); W.R. Grace & Co. Conn. v. Waters, 638 So.2d 502, 506 (Fla.1994) (allowing defendant to introduce evidence about previous punitive damage awards in second stage of bifurcated trial); Spaur v. Owens-Corning Fiberglas Corp., 510 N.W.2d 854, 868 (Iowa 1994) (allowing for consideration of past awards actually paid by defendant for the same course of conduct); Tetuan v. A.H. Robins Co., 241 Kan. 441, 738 P.2d 1210, 1241 (1987) (allowing evidence of other punitive damage awards); Bennett v. Owens-Corning Fiberglas Corp., 896 S.W.2d 464, 468 (Mo.1995) (holding that the defendant‘s “specific financial condition” is admissible in mitigation of punitive damages); Fischer v. Johns-Manville Corp., 103 N.J. 643, 512 A.2d 466, 480 (1986) (allowing defendants to offer evidence of previously paid punitive damage awards for jury to consider whether the defendant has been sufficiently punished); Wangen v. Ford Motor Co., 97 Wis.2d 260, 294 N.W.2d 437, 459-60 (1980) (holding that the jury may consider punitive damages, fines, and forfeitures already imposed on the defendant); Sears v. Summit, Inc., 616 P.2d 765, 772 (Wyo.1980) (“Not only may the plaintiff introduce evidence as to the wealth of the defendant, but the defendant may also introduce evidence of impecunity in order to mitigate the award of punitive damages.“); see also Seltzer, Punitive Damages in Mass Tort Litigation: Addressing the Problems of Fairness, Efficiency and Control, 52 FORDHAM L. REV. 37, 59 (1983) (“By considering other punishment for the same conduct, along with evidence of the defendant‘s current financial status, a jury should be able to make a more informed judgment of the amount necessary for punishment and deterrence.“).
We are persuaded that Texas law should allow defendants to introduce some evidence to mitigate punitive damages. Accordingly, we hold that evidence about the profitability of a defendant‘s misconduct and about any settlement amounts for punitive damages or prior punitive damage awards that the defendant has actually paid for the same course of conduct is admissible when the defendant offers it in mitigation of punitive damages.3 Such evidence is relevant
Evidence that is not relevant, or is unduly prejudicial, and thus, not admissible to mitigate punitive damages, includes actual damage amounts paid by settlements or by judgments; the number of pending claims filed against a defendant for the same conduct; the number of anticipated claims for the same conduct; insurance coverage; unpaid punitive damages awards for the same course of conduct; and evidence of punitive damages that may be levied in the future. See
OCF cites comment e of the
(1) Punitive damages are damages, other than compensatory or nominal damages, awarded against a person to punish him for his outrageous conduct and to deter him and others like him from similar conduct in the future.
(2) Punitive damages may be awarded for conduct that is outrageous, because of the defendant‘s evil motive or his reckless indifference to the rights of others. In assessing punitive damages, the trier of fact can properly consider the character of the defendant‘s act, the nature and extent of the harm to the plaintiff that the defendant caused or intended to cause and the wealth of the defendant.
While we agree with section 908, we do not subscribe to comment e‘s suggestion that in considering the amount of punitive damages necessary to satisfy the goals of punishment and deterrence, the fact finder should be allowed to consider unpaid punitive damages. See
Studies also confirm that punitive damage awards are “likely to be greatly reduced by posttrial actions.” MICHAEL G. SHANLEY & MARK A. PETERSON, THE INSTITUTE FOR CIVIL JUSTICE, POSTTRIAL ADJUSTMENTS TO JURY AWARDS 36 (1987); see also LANDES & POSNER, supra, at 304; Galanter, Real World Torts: An Antidote To Anecdote, 55 MD. L. REV. 1093, 1115-1130 (1996) (citing several studies about reduction and payment of punitive damages); Milo Geyelin, Product Suits Yield Few Punitive Awards, WALL ST. J., Jan. 6, 1992, at B1 (discussing study that revealed that punitive damages are “rarely paid” and otherwise “frequently reduced after trial“). We also agree with courts that have recognized that the impact of other punitive damages awards can only be measured if they have actually been paid. See, e.g., Stevens, 57 Cal.Rptr.2d at 536-37; Spaur, 510 N.W.2d at 868; Fischer, 512 A.2d at 480; see also Dunn, 1 F.3d at 1389-90 (requiring proof of punitive damages “actually paid in the past” and rejecting consideration of “non-final awards of punitive damages” and of settlements where OCF did not segregate settlement amounts paid as punitive damages); Johnson v. Celotex Corp., 899 F.2d 1281, 1287-88 (2d Cir.1990) (rejecting defendant‘s request that appellate court take judicial notice of other punitive damage awards because defendant did not provide any documentation about “exactly how much money they have actually paid in punitive damages“).
At oral argument, Malone asserted that, if evidence to mitigate punitive damages is relevant, the trial court should consider it as a legal issue rather than submit it to the fact finder. However, we believe that the fact finder will better perform its role as the community‘s conscience in determining the proper punitive damages award by considering such evidence. See
Whether a punitive damage award violates state common law or is “grossly excessive” in violation of a party‘s due process rights remains for the courts to decide when properly preserved. See BMW, 517 U.S. at 568 (setting constitutional limits on the size of punitive damages awards); see also Owen, A Punitive Damages Overview: Functions, Problems, and Reform, 39 VILL. L. REV. 363, 384-85 (1994) (Owen II) (recognizing that adequate jury instructions and appellate review of punitive damages verdicts helps “assure that the standards ... are applied in a manner that is as fair and accurate as possible“); Seltzer, supra, at 41 (noting that using a bifurcated trial procedure and appellate review helps “assure that juries have a continuing voice in the amount of punishment while providing the safeguards necessary to prevent unfairness to defendants“). Indeed, Texas law requires careful appellate scrutiny of punitive damage awards. See
2. Standard of Review
Evidentiary rulings are “committed to the trial court‘s sound discretion.” City of Brownsville v. Alvarado, 897 S.W.2d 750, 753 (Tex.1995). A trial court abuses its discretion when it rules “without regard for any guiding rules or principles.” Alvarado, 897 S.W.2d at 754. Trial courts may exclude relevant evidence if its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues, or misleading the jury. See
C. ANALYSIS
While some of OCF‘s “enough is enough” evidence, such as OCF‘s net worth and its profits from the sale and manufacture of Kaylo, relates to “the situation of the parties” under Kraus and to the size of the punitive damages award necessary to sufficiently punish and deter OCF, other parts are inadmissible. See Kraus, 616 S.W.2d at 910; see also Lunsford, 746 S.W.2d at 472. The Frank transcript and the McOmber affidavit include evidence about the average value of resolved claims, litigation expenses, and prior payments for actual damages. Evidence about past settlements for actual damages does not necessarily aid the fact finder in deciding what amount of punitive damages will satisfy the policy goals of punishment and deterrence. See Dunn, 1 F.3d at 1390-91; Pittsburgh Corning Corp., 901 F.2d at 281-82. As we have explained, evidence of past settlements must specify the amount allocated for punitive damages. Actual damage settlements or awards and litigation expenses in other cases are not relevant to the policy purposes supporting punitive damage awards. See Dunn, 1 F.3d at 1390-91; Pittsburgh Corning Corp., 901 F.2d at 281-82. Unlike evidence of other punitive damage settlements or awards against OCF, included as punishment for the same course of conduct, evidence of actual damages and expenses in other cases is inappropriate because each case is fact specific and unrelated to the particular plaintiffs here. See Pittsburgh Corning Corp., 901 F.2d at 281-82; see also Malone Serv. Co., 829 S.W.2d at 769 (“[E]vidence of differing outcomes in unrelated cases ... could cause incalculable prejudice.“) (Gonzalez, J., concurring).
The trial court‘s ruling also excluded evidence about insurance, 62,000 unresolved asbestos claims, and about twenty-eight judg-
While we agree with OCF that evidence about the profitability of its misconduct and about punitive damages paid for the same course of conduct should be admissible in mitigation of punitive damages, the record does not support OCF‘s argument that the trial court‘s ruling probably caused the rendition of an improper judgment. See
Accordingly, we affirm the court of appeals’ judgment in Malone.
III. OCF v. Wasiak
A. SINGLE PUNITIVE DAMAGE AWARD AND DUE PROCESS
Initially, OCF again complains about the exclusion of Frank‘s testimony at trial. Here, OCF sought to read into evidence a transcript of Frank‘s former testimony with accompanying exhibits as its “enough is enough” evidence. In response to the plaintiffs’ objection that OCF had not shown Frank‘s unavailability, OCF‘s attorneys argued that Frank, a California resident, was not subject to the trial court‘s subpoena power, and added that Frank was on a European vacation. We agree with the court of appeals when it held that the trial court properly excluded OCF‘s “enough is enough” evidence because OCF did not establish Frank‘s unavailability under Texas Rule of Evidence 804 for transcribed testimony from another proceeding. See
After the trial, the trial court held a full evidentiary hearing on OCF‘s motion to set aside or reduce the punitive damage awards. At the posttrial hearing, the trial court heard OCF‘s evidence, including Frank‘s live testimony, about its financial condition, including evidence about previous asbestos-related punitive damage awards. That record also shows that, at the time, OCF had only paid $3 million in past punitive damage awards. And again, counsel for OCF conceded this fact at oral argument before this Court. OCF‘s posttrial evidence shows that it has not paid any punitive damages in Texas or Alabama.
OCF first argues that the punitive damage award in this case is unconstitutionally excessive under BMW of North America v. Gore.4 As a threshold matter, Wasiak ar-
1. Applicable Law
The Due Process Clause “prohibits a State from imposing a ‘grossly excessive’ punishment on a tortfeasor.” BMW, 517 U.S. at 562. BMW marks the first time that the Supreme Court found a punitive damages award so excessive that it violated a party‘s substantive due process rights. See BMW, 517 U.S. at 585-86. Under BMW, even if an assessment of punitive damages is not deemed excessive under governing state law, it may violate a party‘s substantive due process right to protection from “grossly excessive” punitive damages awards. See BMW, 517 U.S. at 568; see also Gasperini v. Center for Humanities, Inc., 518 U.S. 415, 430 n. 12 (1996) (noting that BMW provides “an ultimate federal constitutional check for exorbitancy” of punitive damages). Similarly, we have recognized that, “like criminal punishment, punitive damages require appropriate substantive and procedural safeguards to minimize the risk of unjust punishment.” See Moriel, 879 S.W.2d at 16-17.
BMW establishes three “guideposts” for determining whether a punitive damages award is unconstitutionally excessive: (1) the degree of reprehensibility of the defendant‘s misconduct; (2) the disparity between actual and punitive damages; and (3) a comparison of the punitive damages awarded and other civil or criminal penalties that could be imposed for similar misconduct. See BMW, 517 U.S. at 574-75; see also TXO Prod. Corp. v. Alliance Resources Corp., 509 U.S. 443, 462 (1993); Pacific Mut. Life Ins. Co. v. Haslip, 499 U.S. 1, 20-21 (1991). We now apply these guideposts to determine whether the punitive damage judgment here is grossly excessive to the extent it violates OCF‘s substantive due process rights. In doing so, we are aware that whether the amount of punitive damages is excessive as a pure factual inquiry5 is beyond this Court‘s jurisdiction. See Kraus, 616 S.W.2d at 910. However, this Court has jurisdiction to determine whether the courts of appeals properly review such factual inquiries. See Keever, 915 S.W.2d at 479; Kraus, 616 S.W.2d at 910. Moreover, this Court has jurisdiction to decide questions of law like the constitutional substantive due process claims presented here. See
2. Analysis
First, the degree of reprehensibility of the defendant‘s conduct is “[p]erhaps the most important indicium” of the reason-
Here, the evidence about OCF‘s conduct justifies punishment. In the early 1950‘s, OCF began distributing Kaylo. A few years later, OCF bought the Kaylo line and became both manufacturer and distributor. There is evidence that OCF knew about the dangers of asbestos even before it began selling or manufacturing Kaylo, but nevertheless consciously engaged in a pattern and practice of failing to warn Kaylo users of such dangers. Thus, there is evidence that OCF‘s conduct over the years displayed an “indifference to or reckless disregard for the health and safety of others,” including the plaintiffs here. See BMW, 517 U.S. at 576; see also Dunn, 1 F.3d at 1374-76. Consequently, the trial court‘s judgment does not offend constitutional due process guarantees under BMW‘‘s first guidepost.
Second, we must examine the ratio of compensatory to punitive damages. See BMW, 517 U.S. at 575; see also Kraus, 616 S.W.2d at 910 (“Exemplary damages must be reasonably proportioned to actual damages.“). This is the “second and perhaps most commonly cited indicium of an unreasonable or excessive punitive damages award....” BMW, 517 U.S. at 580. In BMW, the punitive damage award (even after reduction by the Alabama Supreme Court) was 500 times the amount of the actual damage award. See BMW, 517 U.S. at 582.
Alabama law does not authorize recovery of compensatory damages for wrongful death claims. See Cherokee Elec. Coop. v. Cochran, 706 So.2d 1188, 1193 (Ala.1997) (citing
| Plaintiff | Compensatory award (Including spouse‘s Loss of consortium) | Punitive award | Ratio |
|---|---|---|---|
| Wasiak | $700,000 | $2,000,000 | 2.85 to 1 |
| Barnes | 750,000 | 1,500,000 | 2 to 1 |
| Brownlee | 500,000 | 750,000 | 1.5 to 1 |
| Wingate | 125,000 | 100,000 | .8 to 1 |
The trial court reduced the jury‘s punitive damage awards to the decedents’ survivors because under Alabama law, in wrongful death cases (but not personal injury cases), the defendant is entitled to credit settlements from settling defendants against its liability for punitive damages. See Tatum v. Schering Corp., 523 So.2d 1042, 1045 (Ala.1988). The trial court also reduced all the compensatory awards to reflect the settlement credits.
Under the trial court‘s judgment, the plaintiffs received about $1.6 million in total compensatory damages and about $3.7 million in total punitive damages, yielding a combined ratio of punitive to compensatory damages of slightly more than 2 to 1. The individual ratios under the judgment are: 2.85 to 1 for the Wasiak plaintiffs; 2.14 to 1 for the Barnes plaintiffs; 1.77 to 1 for the Brownlee plaintiffs; and 1.15 to 1 for the Wingate plaintiffs. Even though the constitutional due process line cannot be “marked by a simple mathematical formula,” BMW,
Third, comparing the punitive damage award with other civil or criminal penalties that could be imposed for comparable misconduct provides a final “indicium of excessiveness.” BMW, 517 U.S. at 583. However, unlike BMW, which involved deceptive trade practices and slight economic harm, the nature of this personal injury and wrongful death case does not lend itself to a comparison with statutory penalties. See Continental Trend Resources, Inc., 101 F.3d at 640-41 (holding that violation of common law tort duties are not comparable to statutory penalties). Importantly though, judicial decisions at the time of the misconduct are also relevant under BMW‘s third prong to ascertain whether a defendant had notice that its misconduct could subject it to a large punitive damages award. See BMW, 517 U.S. at 584; Continental Trend Resources, Inc., 101 F.3d at 641. Thus, the question under BMW is whether OCF had reasonable notice that its failure to provide warnings about the dangers of Kaylo could result in substantial punishment in the form of punitive damages. See Continental Trend Resources, Inc., 101 F.3d at 641 (applying BMW guideposts on remand after BMW decision). Although the notice analysis is difficult to apply because OCF‘s misconduct during the 1950‘s and 1960‘s occurred before product liability law was mature and before punitive damages as a remedy in product cases was fully assimilated into our jurisprudence, the law has recognized for decades that a supplier has a duty to adequately warn of its product‘s hidden dangers. See Noel, Products Defective Because of Inadequate Directions or Warnings, 23 Sw. L.J. 256, 264-67 (1969); see also Owen I, supra, at 1258; Owen, Problems in Assessing Punitive Damages Against Manufacturers of Defective Products, 49 U. CHI. L. REV. 1, 2-3 (1982) (Owen III). Indeed, the original Restatement articulated a supplier‘s duty to warn about a product‘s dangers. See
The evidence here shows that OCF knew about the dangers of asbestos even before it began selling or manufacturing Kaylo. Moreover, reported cases involving damages caused by defective products gave a manufacturer like OCF notice that its misconduct—here OCF‘s manufacture of asbestos-containing Kaylo for about 14 years and the distribution of it for almost 20 years without warning of Kaylo‘s dangers—could subject it to punitive damages. See, e.g., Standard Oil Co. v. Gunn, 234 Ala. 598, 176 So. 332 (1937) (affirming punitive damage award for sale of adulterated motor oil); Birmingham Ry. Light & Power Co. v. Murphy, 2 Ala.App. 588, 56 So. 817 (1911) (upholding punitive damage award for faulty wiring on street car); Toole v. Richardson-Merrell, Inc., 251 Cal.App.2d 689, 60 Cal.Rptr. 398 (1967) (upholding $250,000 punitive damage award for drug manufacturer‘s failure to warn consumers about known hazards of its product); Boise Dodge, Inc. v. Clark, 92 Idaho 902, 453 P.2d 551 (1969) (affirming punitive damage award against auto dealer for misrepresentations about auto); Moore v. Jewel Tea Co., 116 Ill.App.2d 109, 253 N.E.2d 636 (1969), aff‘d, 46 Il1.2d 288, 263 N.E.2d 103 (1970) (affirming punitive damage award against manufacturer because it did not warn consumers of known risk of explosion of can of “Drano” drain-cleaner); see also Owen I, supra, at 1269 (discussing Fleet v. Hollenkemp, 52 Ky. 219 (1852) (involving the sale of an adulterated drug where court upheld punitive damage award)); Wheeler, A Proposal for Further Common Law Development of the Use of Punitive Damages in Modern Product Liability Litigation, 40 ALA. L. REV. 919 (1989) (discussing history of punitive damage awards in product liability litigation). And “[i]t has long been established ... that tortious behavior that is particularly egregious will warrant punitive damages.” Continental Trend Resources, Inc., 101 F.3d at 638. Despite the dearth of judicial decisions about punitive damages in products liability cases during the relevant time period, the award in
Although the court of appeals did not have the benefit of BMW when it reviewed the punitive damage awards against OCF, applying the BMW guideposts reveals that we should not alter the court of appeals’ conclusion. We hold that the punitive damage awards here do not, by themselves, violate due process under BMW‘s standards.
B. MULTIPLE PUNITIVE DAMAGE AWARDS AND DUE PROCESS
We next consider OCF‘s claim that any further punitive damage awards levied against it for manufacturing and distributing Kaylo, beginning with the punitive damage awards here, are excessive as a matter of law in violation of the Due Process Clause. OCF argues that continued punitive damage awards for the same course of conduct violate substantive due process because the punishment and deterrence objectives underlying punitive damages have already been achieved by previous punitive damage awards for that course of conduct. OCF contends that because no legitimate purpose is served by additional punitive damage awards against it for manufacturing and distributing Kaylo, continued punitive damage awards, including the ones here, are irrational and arbitrary in violation of the Due Process Clause.
1. Applicable Law
Answering this constitutional argument is no easy task. Professor David Owen, who has studied and written about this issue for the last two decades, has observed that the issue “is a problem of enormous complexity which requires much analysis and ingenuity.” Owen II, supra, at 394. Courts have also expressed concern and frustration about this issue. See, e.g., Edwards v. Armstrong World Indus., 911 F.2d 1151, 1155 (5th Cir.1990) (“If no change occurs in our tort law or constitutional law, the time will arrive when Celotex‘s [asbestos] liability for punitive damages imperils its ability to pay compensatory claims and its corporate existence.“). Of the many courts that have faced this challenge, only one has expressly held that multiple awards of punitive damages for the same conduct violate a defendant‘s due process rights. See Juzwin v. Amtorg Trading Corp., 705 F.Supp. 1053, 1064 (D.N.J.1989) (Juzwin I), vacated, 718 F.Supp. 1233, 1234 (D.N.J.1989) (Juzwin II) (vacated but abiding by previous ruling “that repetitive awards of punitive damages for the same conduct violate a defendant‘s due process rights“). Other courts faced with this argument have rejected it for five principal reasons.
First, courts have rejected due process challenges to multiple punitive damage awards by holding that procedural safeguards provide all the protection that is necessary. See, e.g., Scheufler v. General Host Corp., 126 F.3d 1261, 1272 (10th Cir.1997); Cathey v. Johns-Manville Sales Corp., 776 F.2d 1565, 1571 (6th Cir.1985); Fibreboard Corp. v. Williams, 813 S.W.2d 658, 686 (Tex.App.—Texarkana 1991, writ denied). However, we believe that courts must consider multiple punitive damage awards for the same conduct against a party‘s substantive due process rights. Whether “to punish a tortfeasor by means of an exaction of exemplary damages is an exercise of state power that must comply with the Due Process Clause of the Fourteenth Amendment.” Honda Motor Co. v. Oberg, 512 U.S. 415, 434-35 (1994). While a punitive damage award “in an individual case may be fair and reasonable, the cumulative effect of such awards may not be.” Juzwin I, 705 F.Supp. at 1055. At some point, punitive damages for the same conduct no longer serve to punish and deter, but instead become grossly excessive in violation of the Fourteenth Amendment‘s Due Process Clause. See BMW, 517 U.S. at 568. Accordingly, we decline to follow these cases.
Second, some courts have rejected substantive due process challenges out of parochial concerns. See In re School Asbestos Litig., 789 F.2d 996, 1001 (3d Cir.1986). These courts reason that a court-imposed limit on punitive damage awards will only affect claimants within their own jurisdiction, prejudicing those claimants and only provid-
Third, courts have rejected OCF‘s argument to avoid what those courts perceive as inequitable results. As Judge Friendly pointed out over thirty years ago, it does not “seem either fair or practicable to limit punitive recoveries to an indeterminate number of first-comers, leaving it to some unascertained court to cry, ‘Hold, enough,’ in the hope that others will follow.” Roginsky, 378 F.2d at 839-40; see also Fischer, 512 A.2d at 478 (reasoning that the fact that a defendant injured a large number of people should not relieve it from multiple punitive damage awards); Davis v. Celotex Corp., 187 W.Va. 566, 420 S.E.2d 557, 565 (1992) (“[I]t seems highly illogical and unfair for courts to determine at what point punitive damage awards should cease.“); Kemp, The Continuing Appeal of Punitive Damages: An Analysis of Constitutional and Other Challenges to Punitive Damages, Post-Haslip and Moriel, 26 TEX. TECH. L. REV. 1, 68 (1994) (noting that limiting multiple punitive damage awards “unfairly advantages the first plaintiff or first few plaintiffs to obtain judgments for punitive damages to the detriment of all others“). But c.f. Owen I, supra, at 1325 (questioning the supposed unfairness of rewarding the initial plaintiffs to a greater extent than subsequent plaintiffs).
While we sympathize with the second and third reasons for rejecting OCF‘s constitutional challenge, these concerns should not stand in the way of protecting a defendant‘s due process rights. “Due process mandates at all times, in all circumstances, and for all defendants, ‘fundamental fairness’ at the hands of the law.” Jeffries, supra, at 152. As we recognized in Moriel, our duty is “to ensure that defendants who deserve to be punished in fact receive an appropriate level of punishment, while at the same time preventing punishment that is excessive or otherwise erroneous.” Moriel, 879 S.W.2d at 17. “[A]t some point, some jurisdiction must face up to the realities of the asbestos crisis and take a step that might ... lead others to adopt a broader view.” Dunn, 1 F.3d at 1399 (Weiss, J., dissenting). Erecting a constitutional barrier to additional punitive damages awards against a particular defendant for the same course of conduct may, to some extent, allow only those plaintiffs who win the “race to the courthouse” to recover punitive damages. However, punitive damages are not designed to compensate individuals, but are only intended to punish tortious conduct and to deter its repetition. See Moriel, 879 S.W.2d at 16; see also BMW, 517 U.S. at 568; Wheeler, The Constitutional Case for Reforming Punitive Damages Procedures, 69 VA. L. REV. 269, 292 (1983) (“As courts have uniformly held, no plaintiff has a right to punitive damages ... the purpose of punitive damages is to vindicate the public interest, not that of a particular plaintiff.“). Therefore, when engaging in a substantive due process analysis of multiple punitive damage awards for the same conduct, courts should focus on the defendant‘s due process rights and whether the twin aims of punishment and deterrence have been adequately served rather than on plaintiffs’ remedies. See Dunn, 1 F.3d at 1402
Fourth, some courts have decided that no single court is capable of crafting an acceptable solution to the national problem of multiple punitive damages in mass tort litigation, and have suggested that legislative action is the answer. See, e.g., Dunn, 1 F.3d at 1386 (collecting state cases and noting that “both state and federal courts have recognized that no single court can fashion an effective response to the national problem flowing from mass exposure to asbestos products.“); Cantrell v. GAF Corp., 999 F.2d 1007, 1017 (6th Cir.1993) (expressing view “that relief from multiple punitive damage awards should not be sought from a federal court sitting in a diversity action but, rather, from the legislature under whose law the action is decided“); Jackson, 781 F.2d at 406 (“The relief sought by [the asbestos defendant] may be more properly granted by the state or federal legislature than by this Court.“); Keene Corp. v. Kirk, 870 S.W.2d 573, 582 (Tex.App.—Dallas 1993, no writ) (“We too conclude that the higher courts and the appropriate legislative bodies should resolve such policy considerations.“) (citing Glasscock v. Armstrong Cork Co., 946 F.2d 1085, 1096 (5th Cir.1991)); W.R. Grace & Co., 638 So.2d at 505 (“Any realistic solution to the problems caused by the asbestos litigation in the United States must be applicable to all fifty states. It is our belief that such a uniform solution can only be effected by federal legislation.“); Fischer, 512 A.2d at 480 (“At the state court level we are powerless to implement solutions to the nationwide problems created by asbestos exposure and litigation arising from that exposure.“).
It may be that a truly uniform solution can only be fashioned by either the Supreme Court or Congress. Nevertheless, the difficulty or enormity of the task does not grant us leave to avoid OCF‘s properly preserved due process challenge under applicable constitutional principles and to ensure that its due process rights are not violated. See Moriel, 879 S.W.2d at 16-17. Indeed, a state court‘s interpretation of federal law about such a challenge is no less important than that of the federal court of appeals in its circuit. See Lockhart v. Fretwell, 506 U.S. 364, 376 (1993) (Thomas, J., concurring). Courts should not wait for congressional or legislative action to correct errors made by the courts themselves. “Mistakes created by courts can be corrected by courts without engaging in judicial activism. It is judicial paralysis, not activism, that is the problem in [mass tort cases involving successive punitive damages awards].” Dunn, 1 F.3d at 1399 (Weiss, J., dissenting); see also Owen III, supra, 60 n. 227.
Finally, courts have rejected due process challenges to multiple punitive damage awards not because such challenges are necessarily unsound as a matter of constitutional law, but because the defendant failed to preserve error on the issue, there was not an adequate record to show a due process violation, or, whatever limits due process may impose on multiple punitive damage awards, that limit clearly was not surpassed on the facts presented. See, e.g., Racich v. Celotex Corp., 887 F.2d 393, 398 (2d Cir.1989) (error not preserved); Pittsburgh Corning Corp., 901 F.2d at 281-82 (no due process violation on record presented); Dunn, 1 F.3d at 1389 (same); Leonen v. Johns-Manville Corp., 717 F.Supp. 272, 285 (D.N.J.1989) (same); Palmer v. A.H. Robins Co., 684 P.2d 187, 216 (Colo.1984) (same). Here, OCF preserved its arguments, and as a result of the posttrial evidentiary hearing, the record is adequate for our review.
Although we recognize that other courts have struggled with the issue and have discussed valid reasons for rejecting OCF‘s due process challenge, we join the courts and commentators that have acknowledged that repeatedly imposing punitive damages on the same defendant for the same course of wrongful conduct may implicate substantive due process constraints. See, e.g., Dunn, 1 F.3d at 1385 (“The principal issue impelling us to take this otherwise routine product liability case in banc is the effect of succes-
The Supreme Court has not considered at what point multiple punitive damages awards arising from the same course of conduct are unconstitutional as a matter of substantive due process. However, if a single punitive damages award becomes unconstitutional when it can fairly be categorized as “grossly excessive” in relation to a state‘s legitimate interests in punishment and deterrence, it follows that the aggregate amount of multiple awards may also surpass a constitutional threshold. See BMW, 517 U.S. at 568; see also Dunn, 1 F.3d at 1404 (Weiss, J., dissenting). Even before BMW held that an individual punitive damage award could exceed constitutional boundaries, many courts and commentators (as we have cited) agreed or expressed concerns, that at some point, the aggregate amount of multiple punitive damage awards becomes fundamentally unfair in violation of due process guarantees. BMW simply lends additional support to the view that multiple punitive damage awards against a party for the same course of conduct can surpass constitutional limits under the Fourteenth Amendment. “The aggregate effect of such awards may reach far beyond their purpose to punish and deter, becoming what has been coined ‘overkill.‘” Jones et al., Multiple Punitive Damage Awards for a Single Course of Wrongful Conduct: The Need for a National Policy to Protect Due Process, 43 ALA. L. REV. 1, 1 (1991).
In deciding whether multiple punitive damage awards against OCF for the same course of conduct—here Kaylo-related claims—offend OCF‘s due process rights, courts cannot “draw a mathematical bright line between the constitutionally acceptable and the constitutionally unacceptable that would fit every case.” Haslip, 499 U.S. at 18. However, we believe the following criteria, derived from BMW and from the Green Oil factors the Supreme Court endorsed in Haslip, are proper for posttrial constitutional review of whether the purposes
We agree with the Second and Third Circuits, neither of which has foreclosed the possibility of a successful substantive due process challenge under an aggregate punitive damages award theory, that such a challenge can properly be evaluated only if the defendant develops a sufficient record. See Dunn, 1 F.3d at 1389; Pittsburgh Corning Corp., 901 F.2d at 281. “Only with [sufficient] factual information can the judge determine that the aggregate of prior awards punishes the entirety of the wrongful conduct to the limit of due process.” Dunn, 1 F.3d at 1389 (quoting Pittsburgh Corning Corp., 901 F.2d at 281). In a posttrial review to decide whether a punitive damages award, when aggregated with previously paid punitive damage awards for the same course of conduct, is unconstitutionally excessive, trial courts may consider evidence beyond what is admissible during the trial. After the trial, the danger of unfair prejudice, confusion of the issues, or misleading the jury no longer exists. Moreover, the issue is then one of law—at what point do multiple punitive damage awards arising from the same course of conduct violate due process. Here, the trial court properly allowed OCF to present its “enough is enough” evidence when Frank testified at the posttrial hearing. The court of appeals also considered Frank‘s posttrial testimony. Using the criteria we have gleaned from BMW and Green Oil, we now examine the record, including the evidence from the posttrial hearing, to determine whether due process requires an end to further Kaylo-related punitive damage awards against OCF in Texas.
2. Analysis
First, and most important, a court should give considerable weight to the degree of reprehensibility of the defendant‘s conduct. See BMW, 517 U.S. at 575. “[T]he duration of that conduct, the defendant‘s awareness, any concealment, and the existence and frequency of similar past conduct,” are all relevant in gauging reprehensibility. See Haslip, 499 U.S. at 21 (discussing Green Oil factors). As we discussed when examining the individual punitive damage award in this case, the court of appeals upheld the trial court‘s judgment finding that OCF‘s conduct demonstrated indifference to the health and safety of others for many years. This finding weighs in favor of allowing additional punitive damages awards against OCF. See BMW, 517 U.S. at 576. The punitive damages paid by OCF thus far are not “grossly out of proportion to the severity of the offense.” See Haslip, 499 U.S. at 22.
Second, a court should examine the profitability of the wrongful conduct. See Haslip, 499 U.S. at 22 (discussing Green Oil factors). The $3 million in punitive damage awards previously paid by OCF7 is double the amount of profits OCF claims it earned from its Kaylo sales. Puni-
Third, because courts should ensure that punitive damage awards do not exceed an amount necessary to accomplish society‘s goals of punishment and deterrence, a court should examine the defendant‘s financial position. See Haslip, 499 U.S. at 22 (discussing Green Oil factors). Here, the trial court and the court of appeals considered OCF‘s “enough is enough” evidence from the posttrial hearing and determined that OCF‘s financial position is not so precarious that further punitive damages awards against it should be disallowed. We agree. The evidence reveals that OCF is a solvent, healthy company. In 1993, shortly before this case was tried, OCF reported to its shareholders that “[a]t the end of 1991, our company was valued by the market at $932 million; 12 months later, the market value of the company was in excess of $1.5 billion, an increase of 60%!” Moreover, in March 1993, OCF reported to the SEC that “the additional uninsured and unreserved costs which may arise out of pending personal injury and property damages asbestos claims and additional similar asbestos claims filed in the future will not have a materially adverse effect on the Company‘s financial position.”8 Thus, we cannot say that the prior paid punitive damage awards against OCF, combined with the punitive damage awards here, have exceeded the goals of punishment and deterrence.
Fourth, previously imposed criminal sanctions for the same conduct are relevant in determining whether a defendant has been sufficiently punished and deterred. See Haslip, 499 U.S. at 22 (discussing Green Oil factors). However, there is no evidence about any such sanctions in this case.
OCF has not shown that the aggregate punitive damage awards against it have exceeded the “twin goals of punishment and deterrence underlying such awards” to constitute a violation of its substantive due process rights. Dunn, 1 F.3d at 1390. Given the nature of OCF‘s conduct and the concomitant injuries suffered by the plaintiffs, OCF‘s relatively stable financial position, and the fact that OCF has actually paid only $3 million in punitive damages for the same conduct, we cannot say that the punitive damage awards here, when aggregated with other paid punitive damage awards against OCF, can be characterized as grossly excessive and beyond the legitimate interests of punishment and deterrence. We therefore conclude, as have other courts when considering OCF‘s same arguments under similar facts, that “the evidence produced by OCF falls short of demonstrating a due process violation.” Spaur, 510 N.W.2d at 867 (record reflected that OCF had paid $3 million in punitive damages); see also Stevens, 57 Cal.Rptr.2d at 539-40 (“Without any showing of punitive damages actually assessed and paid [by OCF], the evidence fell far short of demonstrating ‘overkill.’ “).
We affirm the court of appeals’ judgment in Wasiak.
IV. CONCLUSION
We hold in Malone that evidence about the profitability of a defendant‘s misconduct and about past settlements that specify amounts for punitive damages or about other paid punitive damage awards for the same course of conduct is relevant and admissible for the fact finder to consider when the defendant offers such evidence in mitigation of punitive damages. We also hold that the punitive damage awards in Wasiak do not violate the Fourteenth Amendment‘s Due Process Clause, either by themselves, or when aggregated with other punitive damages previously paid by Owens-Corning Fiberglas for the same conduct. We affirm the courts of appeals’ judgments.
PHILLIPS, C.J., filed an opinion concurring in the judgment only in which ENOCH, J., joined.
HECHT, J., filed an opinion concurring in the judgment only.
OWEN, J., also filed an opinion concurring in the judgment only.
PHILLIPS, Chief Justice, joined by ENOCH, Justice, concurring.
I concur in the Court‘s judgment and join in its opinion except for the discussion regarding the admissibility of prior, unpaid punitive damage awards. For the reasons explained by the Court, I agree that such awards should generally not be admissible when offered by a defendant to mitigate punitive damage liability. Because such awards are often reduced after trial or on appeal, admitting them into evidence would often cause unfair prejudice and confusion.
There may be rare instances, however, where this rationale does not apply. If a defendant has engaged in a course of conduct resulting in repetitive punitive damage awards against it, and the defendant can demonstrate that such punitive awards have been regularly upheld on appeal, then those awards, even if unpaid at time of the current trial, should be admissible as mitigating evidence. The risk of prejudice from admitting the awards is no longer present in this situation. To the contrary, the defendant is at risk of unfair prejudice if the punitive awards are not admitted.
Therefore, rather than setting forth a hard-and-fast rule, as the Court has done, I would leave room for the admissibility of unpaid punitive awards in exceptional cases.
HECHT, Justice, concurring in the judgment.
My most serious reservation about the Court‘s opinion is its conclusion that evidence of pending and future claims and unpaid punitive damage awards should never be admissible. Comment e to
Another factor that may affect the amount of punitive damages is the existence of multiple claims by numerous persons affected by the wrongdoer‘s conduct. It seems appropriate to take into consideration both the punitive damages that have been awarded in prior suits and those that may be granted in the future, with greater weight being given to the prior awards.1
My initial concern is that the Court‘s rejection of comment e is entirely gratuitous. The evidence of future punitive damages awards offered in these cases is not such that the judgments would be affected under the Court‘s opinion. Rather than rejecting comment e out of hand, the Court could just as easily argue that even if comment e were followed, the result in these cases would be no different. The Court must go out of its way to disavow comment e‘s application, not only in the present cases where it makes no difference, but in any cases, ever. In these the first cases in which the subject has been raised, I find it hard to understand how a categorical rejection of a rule the respected Restatement has endorsed for almost two decades can be justified.
The Court gives two reasons for rejecting the Restatement position. One is that “many punitive damage awards are reduced after trial, reversed on appeal, or settled at a
While I certainly do not argue for the admission of speculative evidence in these or any other cases, it seems to me that the Restatement is exactly right in suggesting that evidence of a future risk of punitive damages can be definite enough to be submitted to the jury. When a party has defended multiple lawsuits arising out of the same subject matter, a sufficient pattern of awards and payments may develop for future liability to be estimated with reasonable reliability. In such instances I see no reason why a jury should be kept any more ignorant of the evidence than, say, the defendant‘s potential investors or lenders. Indeed, it would be improper to exclude such evidence. If it is essential that potential investors in a public company know its risks of liability for punitive damages (as well as actual damages), why is that same information irrelevant to a jury in assessing punitive damages? On the other hand, I can just as easily conceive of circumstances in which the risk of potential punitive damages liability would be so remote or speculative that the probative value of any evidence the jury could be given would be far outweighed by its likely prejudicial effect. Comment e does not prohibit exclusion of evidence of future punitive damages awards; it only allows admission of such evidence. That the risk of punitive damages liability may sometimes be uncertain is reason to exclude particular evidence, but no reason to abolish the rule allowing it in other circumstances.
The second reason that the Court gives for rejecting the Restatement position is that others have. Again, that is true, but those who have are in a distinct minority. The weight of authority, not surprisingly, supports the Restatement.
The Model Uniform Products Liability Act recognizes a defendant‘s potential exposure to other claims for punitive damages and other sanctions among the factors to be considered by the court in fixing the amount of punitive damages. The Act calls for consideration of “the total effect of other punishment imposed or likely to be imposed upon the product seller as a result of the misconduct, including punitive damage awards to persons similarly situated to the claimant and the severity of criminal penalties to which the product seller has been or may be subjected“.3 As the accompanying analysis explains,4 the Act draws from an earlier Minnesota statute,5 which in turn drew upon the factors suggested by Professor David G. Owen in 1976.6 At least Kansas,7 Oregon,8
Case law, too, recognizes the relevance of past and potential exposure to additional awards for the same misconduct as an antidote to overkill concerns, sometimes as part of the review applied by courts, and other times as relevant evidence which could be presented to a jury. High courts in at least seven states—Alaska12, Colorado13, Florida14, Minnesota15, Oregon16, West Virginia17, and Wisconsin18 have noted the significance of such awards. Comment e has also been favorably viewed in numerous intermediate appellate courts.19 Only a few federal courts
The cases cited by the Court are a mixed bag. In Dunn v. HOVIC22, the court rejected OCF‘s due process challenge, pointing out that OCF at a minimum should have put on evidence showing how much it had actually paid toward the punitive damage verdicts listed in its post-trial affidavits. The court also concluded that OCF had failed to show that it would be unable to pay future awards of compensatory or punitive damages. The court pointed to an Annual Report suggesting a declining severity in the nature of recent claims, and that OCF “‘anticipates achieving a gradual reduction in per case indemnity payments.‘”23 Nevertheless, in determining whether to grant remittitur, the court expressly took into consideration all of the factors listed in comment e, including the multiplicity of claims.24 Although the trial court had reduced punitive damages from $25,000,000 to $2,000,000, the appellate court concluded that insufficient consideration had been given to the effect of successive punitive damages claims. That was the factor, “above all,” that led the appellate court to reduce the award to $1,000,000.25
The Court‘s reliance on Spaur v. Owens-Corning Fiberglas Corp.26 is similarly flawed. Citing Dunn, the court agreed that “past awards actually paid” should be considered in reviewing punitive damages awards, but the court did not say that that was the sole factor courts should consider. Similarly, the court in Johnson v. Celotex Corporation27 concluded that defendant failed to support its due process challenge, observing that defendant had failed to document how much had actually been paid. Johnson did not, however, state that this information alone was relevant. Only in Fischer v. Johns-Manville Corp.28 may it fairly be implied that the court chose not to include unpaid, past awards, or potential future awards. Again, however, nothing in the court‘s opinion prohibited consideration of such evidence in other cases.
Other cases the Court cites are more directly opposite its position. In Stevens v. Owens-Corning Fiberglas Corp.29, the court
In sum, case law from other jurisdictions can in no way be said to support the Court‘s position in the present cases. On the contrary, the overwhelming weight of authority supports comment e.
The Court‘s rejection of comment e is not only unnecessary; it is ill-founded. Because I cannot join in this aspect of the Court‘s analysis, I concur only in the Court‘s judgments in these cases.
OWEN, Justice, concurring in the judgment.
I concur in the judgment. It is unnecessary for the Court to decide whether evidence of pending and future claims or evidence of unpaid punitive damages awards is ever admissible. See at 54 (Hecht, J., concurring). Because those questions should be decided if and when they are squarely presented and fully briefed, I do not join in the Court‘s opinion or either of my concurring colleagues’ opinions.
BAKER
JUSTICE